Money managers under the microscope
Given the amount of money central banks have been pumping into the global economy you’d be forgiven for thinking we should be getting a pretty decent recovery right now. And whilst that seems true for emerging markets, market participants and consumers just can’t rid themselves of the feeling that there is another shoe yet to drop.
Citi’s Matt King encapsulated this general nervousness in his presentation at the CFA Institute’s European Investment Conference in Copenhagen on Tuesday. And according to King, there are some very good reasons why corporates and households just can’t bring themselves to load up on more debt.
“We’ve had the worst recession since the 1930s, but it doesn’t feel like it, because we haven’t taken all the pain yet,” he said. “We’ve simply shuffled the debt around – that’s why markets are still so volatile and correlations are so elevated.”
King argued that if this is a normal cycle, corporates will soon come under pressure from shareholders to start borrowing again in order to invest and expand. “The risk is this is not a normal cycle, but something different,” he said.
News and views on the asset management industry from Reuters and elsewhere:
The Dow Jones Industrial Average has recouped more than 50 percent of the losses from the October 2007 peak and the March 2009 bottom.
It’s been a remarkable rally, and the cheerleaders of the world’s major economies say it indicates a return of confidence to markets.
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Hedge funds are winners from recession- Democrat and Chronicle
AIMA offers revised hedge fund administrator guide- Finalternatives
2008 may have been the year of shorting imperilled financials, but 2009 could be the year of shorting companies with too much debt or those bearing the brunt of the recession.
Numbers from Dataexplorers show Consumer Discretionary and Industrials are among the sectors with the most stock out on loan in the UK– a good indicator of short-selling activity.